Atlanta audit finds spending without proper oversight

An internal audit shows top aides to former Atlanta Mayor Shirley Franklin spent about $4.7 million on change orders for the construction of the city's new public safety facilities without adequate documentation or required approval, the Atlanta Journal-Constitution has learned.

The change orders -- requests to spend more to complete a particular project -- should had been approved by the chief procurement officer or the City Council, the report said.

"None of those things happened," auditor Leslie Ward said in an interview.

The audit also found city officials processed two bank loans totaling $24 million without going through the city's financial controls.

"Failure to follow procurement rules is a red flag for potential fraud, increasing the risk that the city will either pay too much for services received or not receive the quality or quantity of services it paid for," the auditor concluded.

The report, released Dec. 21, suggests city officials could have done a better job of keeping council members informed as construction costs rose to more than $100 million for the three buildings. For example, at one point during the construction process, there was a gap of six months between progress updates to the council.

The audit found no evidence of fraud or waste, but noted there were no assurances fraud didn't occur.

Council members Natalyn Mosby Archibong and C.T. Martin have requested a forensic audit of the construction and the sale of City Hall East, where police and fire rescue  worked until they moved into the new headquarters in June 2009. The council's public safety committee will review the request next week.

"I was left with questions," Archibong told the AJC. "The hope is the forensic audit will result in answers."

In a separate interview Wednesday, Martin voiced frustration over the audit findings. .

"Why did these people circumvent the procurement process so often?" he asked. "How can you have public trust?"

David Edwards, a senior policy adviser to Franklin, wrote in a letter to the auditor's office that mistakes "are always made in the management and execution of complex problems," but argued that quality work was "completed on time and on budget."

Ward wrote in a letter to city officials that it is "implausible to say that the public safety facilities were delivered on time and on budget." The auditor said the work was supposed to be finished by October 2008. The AJC reported in July 2008 that police officials said they would begin moving from the old headquarters that September. Edwards said the target date to sell City Hall East to a developer "slipped" and there was no rush to meet the October move date.

Edwards disputed the audit's finding that the change orders were improperly managed. He wrote the change orders did not result in increased cost to complete construction of the new facilities. He said the money was budgeted elsewhere or paid through contingency funds.

As for the two loans totaling $24 million, Edwards agreed the process for managing the funds was flawed. But he noted there was no evidence showing the city didn't received the items requested.

Edwards, who is working for the city in a temporary capacity, was out of town Wednesday and couldn't be reached for comment.

City leaders have been sensitive to financial management concerns since early 2008, when early fallout of the economic recession exposed a $70 million budget shortfall at City Hall and some outdated budgetary practices.